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Central North Carolina | Of course prices have spiked due to the drought, but 35+% of the US corn crop to ethanol changes the supply and demand curves relatively permanently. That has been reflected in higher corn prices now for several years. More land to corn has pushed competing grain prices up as well. Droughts come and go and prices go up and down but the ethanol deal has move the baseline way up. And that ain't changing in the foreseeable future. The new supply curve makes farming more profitable, less risky and encourages expansion by individuals and easier credit around the world. Basically the same thing happened to oil when OPEC decided to restrict output. Prices went up and drilling exploded around the world because it is more profitable to do it. It may be the case that yields will increases over time to allow us to have our cake and eat it too, and we may be able to shift to other feed ingredients, but I don’t see that happening soon. My experiences growing up were with the restricted supply of tobacco because of the tobacco program that ended in 2004 or 5. Prices today for flue cured tobacco are much the same as they were 30 years ago. Thirty years ago we supplied the world with high quality tobacco. Now South American and African countries all have taken much of our export market because it was so profitable to do so. We were even importing tobacco into the US while restricting production just to keep prices high. Those high prices caused us to lose a lot of our export markets and the same thing will happen to corn and livestock. Back in the day we thought our tobacco quality would always be superior and countries would always be begging for our golden leaf. They were wrong. Consumption is down here but not in many places in the world. I know tobacco has other health/political issues involved but the economics of ethanol are much the same. My fear is that we are enjoying our good times in the Corn Belt, while we are gradually giving our exports markets away on a silver platter. | |
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JBS and grass fed beef from Brazil
